According to the cognitive model of panic disorder (PD), panic attacks are triggered and maintained by catastrophic misappraisals of bodily sensations. Clinically, PD is associated with impaired cognitive emotion regulation strategies involving cognitive reappraisal. To investigate the neural correlates and time course of cognitive reappraisal in patients with PD, event-related potentials were recorded from patients with PD and demographically matched control group during passive viewing of affective images under three conditions: (a) neutral pictures preceded by neutral descriptions, (b) unpleasant pictures preceded by negative descriptions, and (c) unpleasant pictures preceded by neutral descriptions. The late positive potential (LPP), an event-related potential component sensitive to cognitive change strategies, was examined as an index of cognitive reappraisal. Consistent with previous results, the unpleasant pictures preceded by negative descriptions had decreased valence ratings, increased arousal ratings, and increased LPP amplitudes compared with the unpleasant pictures preceded by neutral descriptions in the control group. In contrast, no reliable effect of description condition was observed for valence ratings in the PD group. The patients demonstrated differing response patterns from the control participants, with higher arousal ratings and larger LPPs during the 1000-2000 ms window when unpleasant pictures were preceded by a neutral description than when unpleasant pictures were preceded by a negative description. The present study suggests that emotion regulation is impaired in patients with PD. These findings describe the first electrophysiological correlates of abnormal cognitive reappraisal in patients with PD.